Yesterday the International Monetary Fund published a paper exploring how emerging economies have capital controls and crypto-assets are a way to get around these. According to the report, “Capital Flow Management Measures in the Digital Age”, in 2019, 90% of IMF member countries had some kind of restriction preventing the free flow of funds across borders.
While most of the restrictions are not substantial, 21 countries had extensive capital flow restrictions. And they are all emerging or developing economies.
Not mentioned in the report is the cryptocurrency crowd’s argument that if countries managed their economies more effectively, then people wouldn’t want to switch out of the local currency or take their money abroad. Capital controls can result in citizens suffering a financial loss – through no fault of their own – as the local currency devalues. Some cryptocurrency startups have targeted countries with weak currencies precisely because their citizens are looking to put their money in assets other than the local currency.
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